For Luxury Goods, How High Is Too High?

embedPhoto: Courtesy of Céline.
Bad news for you one-percenters out there — or, anyone hoping to finally splurge on a Speedy bag. This year, luxury goods are expected to undergo their steepest price increase in years.
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CNBC reports that ultra-luxury brands, such as Hermès and brands owned by LVMH (which include Céline, Dior, and Givenchy), may raise prices between 4 and 6% percent. Meanwhile, Gucci, Burberry, and Prada costs could go up 2 to 3%. These hikes come on top of a 4% annual increase luxury products have seen between 2012 and 2014 — which means, if you bought your fancy bag back in 2012, it's practically a bargain now.
These inflation-outpacing price hikes are prompted by strong foreign currency rates — and, interestingly, by the changing habits of Chinese consumers. Over the past few years, Chinese buyers have increasingly traveled to Europe to purchase their designer goods to save on taxes. That has prompted many European retailers to raise prices. The price hikes are also seen as a move to maintain brands' exclusivity.
But, while market analysts say that the recently bigger tickets haven't affected sales of ultra-luxe brands, such as Chanel, Louis Vuitton, and Hermès ("consumers lap it up," one analyst said), other brands, like Mulberry, have seen the ever-rising price strategy backfire with decreased sales. It seems all the greedy pricing has its limits, or, a shopper can hope. (CNBC)
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